Crompton Greaves Consumer Electricals (NSE:CROMPTON) Is Due To Pay A Dividend Of ₹3.00

The board of Crompton Greaves Consumer Electricals Limited (NSE:CROMPTON) has announced that it will pay a dividend on the 25th of August, with investors receiving ₹3.00 per share. The dividend yield will be 0.7% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Crompton Greaves Consumer Electricals' stock price has increased by 57% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Crompton Greaves Consumer Electricals

Crompton Greaves Consumer Electricals' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Crompton Greaves Consumer Electricals was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 93.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Crompton Greaves Consumer Electricals' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹3.00. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Crompton Greaves Consumer Electricals' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Crompton Greaves Consumer Electricals is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Crompton Greaves Consumer Electricals' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Crompton Greaves Consumer Electricals that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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